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In order to encourage growth and reduce the unemployment rate, Algeria is seeking to diversify its economy, which is now heavily dependent on hydrocarbons, by developing the traditional sectors such as agriculture, but also business services, ICT, tourism, etc. Thereby, the country hopes to create the needed jobs to absorb its increasingly numerous and qualified workforce. It also aims at developing domestic consumption with less reliance on imports, and increasing exports. Recognising the central role of the private sector in contributing to job creation, particularly SMEs (currently few and concentrated in some sectors), the Government has undertaken a vast programme of reforms to transform the production framework and the structure itself of the national economy. In this way, the Government hopes to improve the competitiveness of domestic entreprises for their introduction into international markets. In this perspective, several major programmes have been launched in the 4 main areas of the economy: land planning, industry, agriculture and fishing, and tourism.

Before establishing any sectoral policy to boost the national economy, the Government has chosen to give priority to the upgrading of the country’s infrastructure. In 2005, it launched a Complementary Plan for Growth Support (PCSC) aiming at improving the services and facilities available to economic actors as well as the whole population. Supplemented by two special programmes for the Highlands and the South, it provided more than 180 billion dollars in investments by 2009. 70% have been spent on basic infrastructure, housing and public facilities. Most of these guidelines are translated into the 2005-2025 Land Master Plan and declined per sector in 19 dedicated master plans. A new five-year plan for funding of basic infrastructure and utilities will be introduced from 2010. It will have a budget of 150 billion dollars.

Announced in late 2006 and discussed in 2007 at the National Industry Conference with all stakeholders, the new industrial strategy has still not been adopted. By providing targeted measures to encourage investment, this strategy aimed at positioning Algeria in sectors with high growth potential: industries processing primary resources (petrochemicals, fertilisers, steel and nonferrous metals, construction materials such as hydraulic binders); upstream industries of existing activities (agri-business, pharmaceuticals, electrics); industries which are still underdeveloped in Algeria in contrast to neighboring countries (renewable energies, automotive and ICT). For now, only the proposed creation of 13 economic development companies has been implemented. National economic champions, these companies will forge partnerships with the private sector to develop the planned large infrastructure projects and revive the domestic industry.

In 2002, an agricultural revival effort began with the implementation of a National Plan for Agricultural and Rural Development. The Government followed up by adopting in 2008 a Law on agricultural orientation. By supporting the revival of the rural sector, this law aims at refocusing agriculture on some promising sectors, streamlining the production process and creating synergies between agricultural sub-sectors, on the one hand, and with the agri-business sector, on the other hand. In the field of fishing and aquaculture, the development policy adopted in 2001 aims at modernising sea fishing and halieutic resources, developing support industries and aquaculture and promoting training and research by promoting private investment and partnership.

Being aware of its significant tourism potential which has been hitherto untapped, Algeria has developed a master plan for tourism. It gives a short, medium and long term vision (2009, 2015 and 2025) of the development of the sector. It also specifies implementation instruments. In order to revive seaside and Saharan tourism, the master plan provides for the establishment of poles and premium tourist villages based on their specificities and attractiveness potential.

FDI represent a relatively small share of total investment in Algeria. Given their importance to the transfer of technology and the improvement of innovation capacities, a specific policy has been defined under the new industrial strategy.

The authorities do not wish to grant FDI a preferential treatment compared to domestic investments, deemed essential for the economic sustainability, even though they recognize their determining role for the competitiveness and growth of the country. Since technology dissemination requires the anchoring of FDI in the national fabric, the Government had chosen to focus its intervention on the development of: partnerships between domestic and foreign companies; outsourcing contracts between subsidiaries of transnational groups operating in Algeria and local SMEs; downstream connections mainly in highly energy-intensive industries; training programmes in new techniques or new businesses by foreign companies.

Presented in May 2009, the new plan of action toughened this position. Foreign companies are forced to sell to local partners: 51% of their participation in investment in Algeria and 30% of the capital in their import companies. This decision confirms the listings of tighter regulations on foreign investments made in 2008. These listings also included: the obligation to locally reinvest profits generated by tax exemptions; the State pre-emptive right on disposals of assets held by foreign investors; the specific taxation of capital gains from transfer of stocks and shares by non-residents; the substitution from the system of concession of public land which could be converted into transfer after 2 years to the permanent concession, etc. Besides, the Government has also amended the import scheme (obligation to have an Algerian partner, import limits of used vehicles). In order to protect local production and prevent an excessive growth of the pharmaceutical bill, the Government has also banned the import of nearly 400 drugs that can be produced locally. These decisions are not neutral for investors.

Nevertheless, the incentives provided for encouraging investment do not lack of significant interest to foreign investors, particularly those relating to: the improvement of the business environment; the functioning of the National Agency for Investment Development (ANDI); the simplification of customs procedures; taxation; the labor market; and most importantly, the creation of integrated industrial zones (ZDI).

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